New hatchery gives Sovereign Foods an edge in egg production

SOVEREIGN Foods, the third largest poultry producer in South Africa, has acquired Blue Hills hatchery in Midrand, Gauteng, for an undisclosed amount.

The group said the hatchery would produce 660 000 eggs equating to 510 000 day-old chicks a week.

Chief executive Chris Coombes said the acquisition would enable the company to be almost self-sufficient in the supply of day-old chicks.

“It further centralises our day-old chick supply chain to our contract farmers in and around our Hartbeespoort abattoir,” Coombes said.

The acquisition of the hatchery, which was previously known as Hyline Africa and has a commercial layer grandparent facility, is part of Sovereign Foods’ expansion strategy.

Three years ago, Sovereign bought an abattoir in Hartbeespoort, a landmark empowerment and preferential off-take agreement with black economic empowerment (BEE) group Cultiver.

This month the group also announced its merger with the Cold Storage Group (CSG), an Eastern Cape wholesaler of poultry and value-added poultry products.

The move saw Sovereign taking a majority ownership stake in CSG and consolidate the five businesses into one business.

CSG comprises five interrelated wholesalers which include Umtata Cold Storage, Kei Cold Storage in Queenstown, Zwelitsha Cold Storage, Wilsonia Cold Storage in East London and Sov Foods Factory Shop in Uitenhage.

The merger was approved by the Competition Commission on February 19.

Sovereign Foods was delisted from the JSE in 2017 after it received a firm intention from a special purpose vehicle controlled by Capitalworks, a private equity firm focused on mid-market investments in South Africa, to acquire a controlling interest in Sovereign Foods for R907 million all-cash buy-out offer.

Coombes said Sovereign Foods has had to purchase a certain portion of its day-old chicks on the open market at a premium.

“Now, our Blue Hills operation will eliminate this process, providing security and resource efficiencies to our company,” he said.

Sovereign Foods officially took ownership of the hatchery last month and has renamed it Hatchery No 3 Blue Hills.

“Ownership of the hatchery operation means that we are able to control the quality of day-old chicks while at the same time ensuring shorter delivery times to farmers in the area.

“The hatchery is situated centrally in relation to our contract farmers and cuts delivery time in half. Shorter delivery time leads to better quality day old chicks,” Coombes said.

Coombes said acquiring the Blue Hills hatchery meant that the group would no longer buy-in as many chicks from external suppliers and that it would be able to keep tighter control over its supply chain.